PART VI

Probity, Codes of Conduct and Miscellaneous Provisions

36. —(1) (a) If a supervisory authority considers that the probity of any officer or employee of an authorised investment business firm is liable to render him unsuitable to act as an officer or employee of an authorised investment business firm the supervisory authority may, on notice to the person concerned and on notice to the authorised investment business firm concerned, apply to the Court to issue a direction to direct the authorised investment business firm concerned to have the officer concerned removed or to dismiss the employee concerned from his employment.

(b) If a supervisory authority considers that any officer or employee of an authorised investment business firm is not competent in respect of matters of the kind with which the officer or employee would be concerned as an officer or employee of an authorised investment business firm, the supervisory authority may, on notice to the person concerned and on notice to the authorised investment business firm, apply to the Court to issue a direction to direct the authorised investment business firm concerned to have the officer or employee concerned removed or suspended for a specified period of time or to dismiss the employee concerned from their employment or to remove that employee from a particular area of employment.

(2) The Court may make such interim or interlocutory orders as it considers necessary under this section.

(3) Subject to subsection (5) of this section, a person who is the subject of a direction under subsection (1) of this section may not, without the written consent of a supervisory authority, be employed in any capacity in connection with an authorised investment business firm or any other entity which any supervisory authority supervises or regulates as part of its statutory functions.

(4) A direction under this section (to be known and in this section referred to as “a disqualification direction”) shall specify the date on which it is to take effect and a copy of it shall be served on the person to whom it relates.

(5) A supervisory authority may consent to the employment of a person who is the subject of a disqualification direction and such consent may—

(a) relate to employment with any entity which the supervisory authority supervises or regulates as part of its statutory functions generally or to employment of a particular kind,

(b) be given subject to conditions or requirements or both, and

(c) be varied by the supervisory authority from time to time.

(6) Any person who accepts or continues in any employment in contravention of a disqualification direction shall be guilty of an offence.

(7) An authorised investment business firm or any entity supervised by a supervisory authority under this Act or any other enactment shall take reasonable care not to employ or continue to employ a person in contravention of a disqualification direction.

(8) A person who is the subject of a disqualification direction may apply to the Court to revoke that direction at any time.

(9) A supervisory authority may apply to the Court to revoke a disqualification direction at any time.

(10) Where a supervisory authority refuses consent under subsection (5) of this section, the person who is the subject of a disqualification direction may appeal to the Court against that decision and the Court may make such order as it considers necessary including making an interim or interlocutory order.

37. —(1) Subject to subsection (2) of this section, a supervisory authority shall draw up and issue a code of conduct for investment business firms which shall include provisions which seek to ensure that an investment business firm—

(a) acts honestly and fairly in conducting its business activities in the best interests of its clients and the integrity of the market,

(b) acts with due skill, care and diligence in the best interests of its clients and the integrity of the market,

(c) has and employs effectively the resources and procedures that are necessary for the proper performance of its business activities,

(d) seeks from its clients information regarding their financial situations, investment experience and objectives as regards the services requested,

(e) makes adequate disclosure of relevant material information including commissions in its dealings with its clients,

(f) makes a reasonable effort to avoid conflicts of interests and, when they cannot be avoided, ensures that its clients are fairly treated, and

(g) complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its clients and the integrity of the market,

and the supervisory authority may impose conditions or requirements on an investment business firm or any class of investment business firm in respect of compliance with the provisions of such a code of conduct or any other code of conduct or rules of like effect.

(2) A code of conduct drawn up under subsection (1) of this section shall not apply to any class of certified person specified by the Bank in respect of which the Bank is satisfied that there are sufficient provisions in the rules of an approved professional body or elsewhere governing the conduct of such certified persons in respect of matters referred to in paragraphs (a) to (g) of that subsection or such other matters as the Bank deems necessary.

(3) Codes of conduct or rules of conduct referred to in subsection (1) or (2) of this section, may be applied in such a way or to such an extent as to take account of the status or experience of the person for whom the services are provided and the provisions of Council Directive 93/22/EEC of 10 May, 1993(1) .

(4) Codes of conduct or rules of conduct (referred to in subsection (1) or (2) of this section) may include criteria for distinguishing between different categories of investment business firms or of investor for the purposes of this section.

(5) A code of conduct drawn up by a supervisory authority under subsection (1) of this section may be revised from time to time by the supervisory authority.

38. —(1) In this Part, “acquiring transaction” shall be construed in accordance with subsection (2) of this section and “disposal” shall be construed in accordance with subsection (3) of this section.

(2) In this Part “acquiring transaction” means any direct or indirect acquisition by a person or more than one person acting in concert of shares or other interest in an authorised investment business firm:

Provided that after the proposed acquisition—

(a) the proportion of voting rights or capital held by the person or persons making the acquiring transaction would exceed a qualifying holding, or

(b) the proportion of voting rights or capital held by the person or persons making the acquiring transaction would reach or exceed 20 per cent., 33 per cent, or 50 per cent., or

(c) an authorised investment business firm would become a subsidiary of the acquirer.

(3) In this Part “disposal” means any direct or indirect disposal by a person or more than one person acting in concert of a qualifying holding or a disposal which would reduce such a qualifying holding so that the proportion of the voting rights or of the capital held by the person or persons would fall below 20 per cent., 33 per cent, or 50 per cent, or so that an authorised investment business firm would cease to be its subsidiary.

39. —(1) Any person who proposes to make an acquiring transaction shall notify a supervisory authority in writing of the proposal as soon as may be and shall include with the notification such information concerning the proposed acquiring transaction as may be specified by a supervisory authority from time to time.

(2) Any person who proposes to make a disposal shall notify a supervisory authority in writing of the proposal as soon as may be and such notification shall include such information concerning the proposed disposal as may be specified by a supervisory authority from time to time.

(3) On becoming aware of any proposals of the type referred to in subsection (1) or (2) of this section, the authorised investment business firm concerned shall inform the appropriate supervisory authority of such proposed acquiring transactions or disposals that cause holdings to exceed or fall below a qualifying holding or 20 per cent., 33 per cent, or 50 per cent, of the capital held or voting rights, or that cause an authorised investment business firm to become, or cease to be, a subsidiary.

(4) Where, having received a notification under this section, the supervisory authority is of the opinion that in order to consider, for the purposes of this section, a proposed acquiring transaction it requires further information it may, within one month of the date of receipt by it of a notification, request such further information in writing from any one or more of the persons concerned with the transaction.

(5) A supervisory authority may approve of, or approve of subject to conditions or requirements or both, or may refuse to approve of an acquiring transaction.

40. —An acquiring transaction shall not proceed until a supervisory authority has informed the authorised investment business firm and the party making the acquiring transaction in writing that it approves of the acquiring transaction or until three months have elapsed during which the supervisory authority has not refused to approve of the acquiring transaction, whichever first occurs, such period beginning on the date on which the supervisory authority first receives a notification under section 39 of this Act, or, where the supervisory authority requests further information from the person or persons concerned under section 39 (4) of this Act, the date of receipt by the supervisory authority of such information.

41. —Where a supervisory authority approves of an acquiring transaction, it may specify in writing a period for the implementation of that transaction.

42. —(1) An approval given by a supervisory authority to a proposed acquiring transaction shall be subject to such conditions or requirements or both as the supervisory authority may impose (being conditions or requirements which in the opinion of the supervisory authority are necessary for the proper and orderly regulation and supervision of investment business firms).

(2) A supervisory authority may, at any time, amend or revoke conditions or requirements or both referred to in subsection (1) of this section.

43. —Subject to section 41 of this Act, an acquiring transaction shall only be valid if it is entered into within—

(a) 12 months of a supervisory authority giving its approval in writing to the transaction, or

(b) 12 months of the end of the three month period referred to in section 40 of this Act,

and, accordingly, any purported acquiring transaction which does not comply with either paragraph (a) or (b) of this section shall be invalid and—

(i) titles to any shares or other interest shall not pass, and

(ii) any consequential purported exercise of powers relating to such shares or other interest shall be invalid.

44. —(1) A supervisory authority shall refuse to approve an acquiring transaction where it is not satisfied as to the suitability of the person proposing to make the acquiring transaction or where the supervisory authority considers that the acquiring transaction is likely to be prejudicial to the sound and prudent management of an authorised investment business firm or the proper and orderly regulation and supervision of an authorised investment business firm or both.

(2) Where a supervisory authority refuses to approve an acquiring transaction or where a supervisory authority becomes aware of a proposed acquiring transaction of which it has not been notified under section 39 of this Act a supervisory authority may issue a direction under section 21 of this Act to the directors and those responsible for the management of an authorised investment business firm concerned.

45. —(1) Where a supervisory authority informs a person making an acquiring transaction in accordance with section 39 of this Act that it—

(a) refuses to give its approval to that transaction, or

(b) gives its approval subject to conditions or requirements,

an appeal may be made by that person to the Court against the refusal or the conditions or requirements attached to the approval, as the case may be, within one month of that refusal or approval being so communicated.

(2) Where the Court allows the appeal it shall direct a supervisory authority to make a decision in accordance with the determination of the Court and a supervisory authority shall make its decision within the period of three months beginning on the date of the determination of the Court.

(3) Where the Court is satisfied, because of the nature or the circumstances of the case or otherwise in the interests of justice, that it is desirable it may decide that the whole or any part of proceedings under this section may be heard otherwise than in public.

46. —(1) A supervisory authority may carry out such inquiries and obtain such information as it considers necessary to enable it to consider a proposed acquiring transaction.

(2) Any person who wilfully or knowingly obstructs or prevents inquiries by a supervisory authority under this section or knowingly or recklessly provides false or misleading information shall be guilty of an offence.

47. —(1) At least once in each year, authorised investment business firms shall inform a supervisory authority of the names of direct shareholders and persons possessing qualifying holdings and the sizes of such holdings.

(2) At least once in each year, authorised investment business firms, having made best efforts to ascertain the identity of all indirect shareholders and persons possessing qualifying holdings, shall inform the relevant supervisory authority of the names of such persons.

48. —(1) Nothing in any enactment shall be construed as relieving an authorised investment business firm or other person of any of its obligations to comply with subsections (1), (2) and (3) of section 39 of this Act.

(2) An order under section 201 or 203 of the Companies Act, 1963, in respect of a proposed amalgamation (being an acquiring transaction) shall not be made until a supervisory authority has given its approval to the acquiring transaction or the period (within which an acquiring transaction may not proceed) referred to in section 40 of this Act has elapsed without a supervisory authority having given or refused to give approval.

(3) A supervisory authority may, having regard to the proper and orderly regulation and supervision of investment business firms, the protection of investors and the requirements of Council Directive 93/22/EEC of 10 May, 1993(1) , following consultation with the Minister, specify circumstances in which, or classes of authorised investment business firm in respect of which, the duties and functions of the supervisory authority under sections 39 to 47 , or of an investment business firm, need not be exercised.

49. —(1) Section 16 of the Central Bank Act, 1989 , is hereby amended by—

(a) the insertion after subsection (2)(l) (inserted by the Stock Exchange Act, 1995) of:

“(m) made to any approved professional body in respect of certified persons, for the purpose of monitoring compliance by investment business firms with rules or with conditions or requirements imposed by the Bank or by a supervisory authority (as defined in the Investment Intermediaries Act, 1995) or both, or where the Bank considers it necessary to do so for the proper and orderly regulation of investment business firms, or made to any supervisory authority,

(n) made to a Committee appointed under section 74 of the Investment Intermediaries Act, 1995, or to a person nominated or approved of by a supervisory authority in accordance with section 51 (2) of the Investment Intermediaries Act, 1995,

(o) made to an inspector appointed by the Court under Part VIII of the Investment Intermediaries Act, 1995”,

(b) the deletion of subsection (6) (inserted by the Stock Exchange Act, 1995), and the insertion of the following subsection:

“(6) In this section, ‘statutory functions’ has the meaning assigned to it by section 2 of the Investment Intermediaries Act, 1995.”, and

(c) the insertion in subsection (2) (d) of “or insurance undertakings”, after “charged by law with the supervision of financial institutions (whether or not entitled to take money on deposit from the public)”.

(2) Notwithstanding section 16 of the Central Bank Act, 1989 , a supervisory authority, where it has reasonable cause to believe that a criminal offence has been committed, may disclose to the Garda Síochána any information to enable further investigation of the alleged offence.

50. —An investment business firm shall not engage in business with clients and investors unless, and in accordance with any procedures set out in codes of conduct under this Act, it informs clients and investors of—

(a) whether or not there is a compensation fund or protection of comparable form, and

(b) the nature and level of protection, if any, available from any such fund.

51. —(1) Subject to subsection (5) of this section, each authorised investment business firm (other than a person who does not provide investment business services) shall hold a bond in a specified form to the value of £50,000 or, in years subsequent to the first accounting year, 25 per cent, of turnover by reference to the previous accounting year, whichever is the greater.

(2) The bond referred to in this section shall provide that in the event of the inability or failure of the authorised investment business firm to meet its financial obligations in relation to any sums of money received by it from, or on behalf of, its clients, a sum of money will become available to a person nominated or approved of by a supervisory authority to be applied for the benefit of any client of the authorised investment business firm who has incurred loss or liability because of the inability or failure of the authorised investment business firm to meet such financial obligations.

(3) The person nominated or approved of by the supervisory authority shall, with the consent of the supervisory authority and up to such sum as may be specified by the supervisory authority, be indemnified out of the proceeds of the bond in respect of such reasonable expenses as are incurred in carrying out the functions provided for in subsection (2) of this section.

(4) The person nominated or approved of by the supervisory authority shall keep all proper and usual accounts, including an income and expenditure account and balance sheet, of all moneys received by him on foot of a bond and of all disbursements made by him from any such moneys and of any amount in respect of the expenses referred to in subsection (3) of this section.

(5) The Minister, following consultations with the supervisory authorities, may prescribe that—

(a) arrangements in relation to the bond shall be entered into only with persons of a class or classes specified in the regulations,

(b) the bond shall be in such form and valid for such minimum period as may be specified in the regulations,

(c) a copy of the bond shall be displayed, for the information of the public, in a prominent position in all premises occupied by an authorised investment business firm and in which it carries on business as an authorised investment business firm, and the bond shall be mentioned in its sales literature and business note paper,

(d) a requirement to enter into a bond shall not apply to classes of authorised investment business firms specified in the regulations or in respect of portions of the business thereof, and such regulations may have regard to the nature of the business of the authorised investment business firm, the creditworthiness or credit rating of the authorised investment business firm, the capitalization or solvency of the investment business firm and the existence of any relevant compensation scheme or guarantees,

(e) in regard to authorised investment business firms which, because they are also insurance intermediaries, are required under Part IV of the Insurance Act, 1989 , to be bonded, a single bond may, subject to such conditions as are prescribed, apply to both investment business services and insurance business and that the requirement to be bonded under Part IV of the Insurance Act, 1989 , would thereby be met.

(6) Any amount or percentage rate in subsection (1) of this section may be altered as trie Minister may from time to time prescribe and different amounts and percentages may be prescribed for different classes of authorised investment business firms by reference to turnover or to such other matters as the Minister may consider appropriate, and the Minister may specify a maximum amount for a bond.

(7) For the purposes of this section—

“accounting year” means the year commencing on a date prescribed by the Minister and subsequent anniversary accounting years and the Minister may prescribe different dates for different classes of investment business firm;

“turnover” means the aggregate of all moneys required to be paid by an investment business firm into the bank accounts required under section 52 of this Act, together with the value of any investment instruments of clients coming into the control of the investment business firm, or where such accounts are not required under section 52 such amount as may be calculated in a manner specified by a supervisory authority.

52. —(1) A supervisory authority may from time to time impose requirements on authorised investment business firms, or may impose requirements or may approve of rules in the rules of an approved professional body, where it considers it necessary to do so having examined the rules of the approved professional body and any relevant enactment regulating the holding of moneys on behalf of clients by persons regulated by that approved professional body, with respect to clients' money and clients' investment instruments and such rules or requirements (in this Act referred to as “client money requirements”) may include conditions under which investment business firms may hold money or investment instruments, or both, for clients.

(2) Without prejudice to the generality of subsection (1) of this section, client money requirements may include requirements or rules in relation to—

(a) the category or categories of investment business firm to whom such requirements or rules apply;

(b) the type or types of accounts to be opened and kept by an investment business firm arising from its business as an investment business firm;

(c) the rights, duties and responsibilities of an investment business firm in relation to money and investment instruments received, held, controlled or paid by it arising from its business as an investment business firm, including the lodgement to and withdrawal from a client account of client money and client investment instruments;

(d) the acknowledgements or statements to be issued by an investment business firm in respect of client money and client investment instruments received, held, controlled or paid by it arising from its business as an investment business firm;

(e) the circumstances in which money other than client money may be paid into accounts containing client money and the circumstances in which, and the persons for whom, money held in such accounts may be paid out;

(f) the safekeeping of client investment instruments and documents of title relating to such investment instruments;

(g) the use of nominee companies by investment business firms;

(h) client entitlements, including the treatment or retention of interest, income or profit arising from any client money or investment instrument or documents of title in such cases as may be specified;

(i) the extent to which such client money requirements apply to associated and related undertakings.

(3) Without prejudice to the generality of subsection (1) of this section and notwithstanding the provisions of subsection (2) of this section, an authorised investment business firm shall—

(a) keep at an office or offices within the State such books and records (including books of accounts) in respect of client money and client investment instruments as may be specified from time to time by a supervisory authority and notify the supervisory authority of the address of every office at which any such books or records are kept;

(b) ensure that any books or records required under this section are examined, at such intervals as may be specified by a supervisory authority, by an auditor who shall report to the supervisory authority and state whether in his opinion the provisions of the client money requirements imposed or rules approved under subsection (1) of this section and the provisions of this subsection have been complied with and on such other matters as may be specified in the client money requirements imposed under subsection (1) of this section;

and an authorised investment business firm which does not comply with the provisions of paragraph (a) of this subsection or which does not ensure that books and records kept in respect of client money and client investment instruments are examined by an auditor at such intervals as shall be specified by a supervisory authority shall be guilty of an offence.

(4) (a) A supervisory authority may specify different books and records for the purposes of this section and in relation to different investment business firms or different classes of investment business firms.

(b) Books and records to be kept pursuant to this section shall be—

(i) in addition to any books or other records to be kept by or under any other section of this Act or any other enactment, and

(ii) retained for at least such period as the supervisory authority may specify.

(5) Without prejudice to the generality of subsection (1) of this section and notwithstanding the provisions of subsection (2) of this section, an authorised investment business firm which knowingly holds client money in an account or accounts with an institution other than an institution or type of institution as may be specified by a supervisory authority from time to time shall be guilty of an offence.

(6) An authorised investment business firm, other than a certified person, which fails to designate an account containing money entrusted to it or received by it for or on account of a client as an account to be known as a “ section 52 account” in all financial records maintained by it shall be guilty of an offence.

(7) No liquidator, receiver, administrator, examiner, official assignee or creditor of an investment business firm shall have or obtain any recourse or right against client money or client investment instruments or documents of title relating to such investment instruments received, held, controlled or paid on behalf of a client by an investment business firm, until all proper claims of clients or of their heirs, successors or assigns against client money and client investment instruments or documents of title relating to such investment instruments have been satisfied in full.

(8) A person with whom an account is kept in pursuance of client money requirements or rules under this section shall not incur any liability as constructive trustee where money is wrongfully paid from the account unless the person permits the payment with knowledge that the payment is wrongful or having deliberately failed to make inquiries in circumstances in which a reasonable and honest person would have done so.

(9) It shall be an offence for a director, officer or employee of an investment business firm or any of them to misappropriate fraudulently any money or investment instruments held, controlled or paid on behalf of a client by that investment business firm.

53. —(1) A supervisory authority or any employee or officer of a supervisory authority or any member of any Board of a supervisory authority or any member of a committee appointed under section 74 of this Act shall not be liable in damages for anything done or omitted in the discharge or purported discharge of any of its functions under this Act unless it is shown that the act or omission was in bad faith.

(2) Without prejudice to the generality of subsection (1) of this section, the approval or revocation of approval or supervision or regulation of an approved professional body or of an approved representative body (within the meaning of section 27 (a) of this Act) or the approval, amendment, revocation or imposition of rules or the consent or refusal to consent to amendments of rules shall not constitute a warranty or other claim as to the solvency or performance of such bodies or of any investment business firm and neither the State nor a supervisory authority shall be liable in respect of any loss or losses arising out of the insolvency or default or performance of any investment business firm.

(3) Without prejudice to the generality of subsection (1) of this section, the authorisation, supervision, regulation or revocation of authorisation of an investment business firm under this Act shall not constitute a warranty as to the solvency or performance of an investment business firm and neither the State nor a supervisory authority shall be liable in respect of any loss or losses incurred through the insolvency, default or performance of the investment business firm.

54. —(1) If—

(a) an authorised investment business firm is being wound up and is unable to pay all of its debts and has contravened section 19 , 52 (3), 52 (5) or 52 (6) of this Act, and

(b) the Court considers that such contravention has contributed to the inability of an authorised investment business firm to pay all of its debts or has resulted in substantial uncertainty as to the amount, location, ownership or otherwise of the assets and liabilities of an authorised investment business firm or of the money or investment instruments of clients of the said authorised investment business firm or has substantially impeded its orderly winding-up,

the Court, on the application of the liquidator or receiver or a supervisory authority or any creditor or client or investor, may, if it thinks it proper to do so, declare that any one or more of the officers or former officers or both of the said authorised investment business firm who is or are in default shall be personally liable, without any limitation of liability, for all, or such part as may be specified by the Court, of the debts and other liabilities of the said authorised investment business firm.

(2) (a) Where the Court makes a declaration under subsection (1) of this section, it may give such directions as it thinks proper for the purpose of giving effect to the declaration and in particular may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from an authorised investment business firm to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of an authorised investment business firm held by or vested in him or any company or other person on his behalf, or any person claiming as assignee from or through the person liable under the declaration or any company or person acting on his behalf, and may, from time to time, make such further order as may be necessary for the purpose of enforcing any charge imposed under this subsection.

(b) In paragraph (a) of this subsection “assignee” includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation or mortgage was created, issued or transferred or the interest created but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the grounds of which the declaration is made.

(3) The Court shall not make a declaration under subsection (1) of this section in respect of a person if it considers that—

(a) he took all reasonable steps to secure compliance by an authorised investment business firm with section 19 , 52 (3), 52 (5) or 52 (6) of this Act, or

(b) he had reasonable grounds for believing and did believe that a competent and reliable person, acting under the supervision or control of a director who has been formally allocated such responsibility, was charged with the duty of ensuring that section 19 , 52 (3), 52 (5) or 52 (6) of this Act was complied with and was in a position to discharge that duty.

(4) This section shall have effect notwithstanding that the person concerned may be liable to be prosecuted for a criminal offence in respect of the matters on the ground of which the declaration is to be made or that such person has been convicted of such an offence.

(5) In this section “officer”, in relation to an authorised investment business firm, includes a person who has been convicted of an offence under section 34 or 79 (7) of this Act or section 194 of the Companies Act, 1990 in relation to a statement concerning the keeping of proper accounting records by an authorised investment business firm concerned.

(6) A person who, being a director of an authorised investment business firm, fails to take all reasonable steps to secure compliance by an authorised investment business firm with the requirements of section 19 , 52 (3), 52 (5) or 52 (6) of this Act, or has by his own wilful act been the cause of any default by an authorised investment business firm thereunder, shall be guilty of an offence:

Provided, however, that—

(a) in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by an authorised investment business firm with the requirements of this section, it shall be a defence to prove that he had reasonable grounds for believing and did believe that a competent and reliable person was charged with the duty of ensuring that those requirements were complied with and was in a position to discharge that duty, and

(b) a person shall not be sentenced to imprisonment for such an offence unless, in the opinion of the Court, the offence was committed wilfully.

(1) O.J. No. L.141 11/6/93.

⁽¹⁾ O.J. No. L.141 11/6/93.